August 8, 2020

ECB cut rates to record low of -0.5%

LQDFX Forex news Blog ECB cut rates to record low of -0.5%

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The ECB cut its deposit rate by 10 basis points to a record low of -0.5%, promised that rates would stay low for longer. ECB monetary easing package was much expected.

The European Central Bank approved fresh stimulus measures on Thursday to prop up the ailing euro zone economy, cutting rates deeper into negative territory and relaunching an extended bond purchase scheme.

With other major central banks easing monetary policy and Germany at risk of falling into recession the ECB was left alone once again as the ‘only game in town’. This and the fact that euro zone governments doing little to prop up the bloc forced policymakers to deploy most of their few remaining tools.

Such a formulation suggests that purchases could go on for years. Markets do not expect rates to rise for nearly a decade.

The rate cut will increase the cost to commercial banks of parking their more than 1 trillion euros worth of excess reserves at the central bank. The ECB said it would compensate lenders for part of this charge to ensure they continued to lend to the real economy. The ECB also eased the terms of its long-term loan facility to banks. It said it would introduce a multi-tier deposit rate facility to help them.

The single currency initially surged then quickly reversed course to ease.


Forex – ECB cut rates to record low of -0.5%

The dollar broadly climbed after the European Central Bank announced measures to boost the region’s economy.

The Canadian dollar weakened to a six-day low against its U.S. counterpart on Thursday as oil prices fell. The loonie was trading 0.1% lower at 1.3204 to the greenback, or 75.73 U.S. cents. The currency touched its weakest since last Friday at 1.3219.

The euro fell back below $1.10 after initially surging on the ECB announcement. After trading as high as $1.1070, the single currency then dropped to the day’s low. The single currency also fell down 0.5% on the session as investors digested news of the rate cut and relaunch of QE.

The euro hit a 28-month low earlier this month of $1.0926.

Gold prices rose on Thursday ahead of a European Central Bank meeting, supported by lingering concerns around global growth. Spot gold was up 0.4% at $1,503.04 per ounce as of 1108 GMT. U.S. gold futures rose 0.5% to $1,510.06.

Oil prices fell on Thursday after a meeting of the OPEC+ alliance yielded no decision on deepening supply cuts. Oil came under further pressure after the ECB cut its deposit rate to a record low -0.5% from -0.4%. Brent crude futures were down $1.20 cents at $59.61 a barrel by 1237 GMT. U.S. WTI fell 96 cents to $54.79. Both were heading for a third session of losses.

PLEASE NOTE The information above is not investment advice.

Sources: Reuters, Investing, CNN money